Major packaged-food companies lost $4 billion in market share alone last year, as shoppers swerved to fresh and organic alternatives. Can the supermarket giants win you back? ... While consumers have long associated the stuff on the labels they can’t pronounce with Big Food’s products—the endless strip of cans and boxes that primarily populate the center aisles of the grocery store—they now have somewhere else to turn (more on that in a bit). And that has brought the entire colossal, $1-trillion-a-year food retail business to a tipping point. ... Shoppers are still shopping, but they’re often turning to brands they believe can give them less of the ingredients they don’t want—and for the first time, they can find them in their local Safeway, Wegmans, or Wal-Mart. Rather than carry traditional products with stagnant sales, chains like Target are actively giving increasing space on their shelves to a slew of New Age players like yogurt-maker Chobani, Hampton Creek (which sells a popular plant-based mayo), Nature’s Path, Amy’s Kitchen, and Lifeway Foods, which makes a yogurt-like drink called kefir. Retailers are creating their own brands too.
Let us say it plainly: Monsanto is almost surely the most vilified company on the planet. To its diehard critics it embodies all that is wrong with big, industrial agriculture—the corporatization of farming, the decline of smallholders, the excessive use of chemicals, a lack of transparency, and, of course, the big one: the entry of genetically modified organisms into our food supply. The tri-letter acronym GMO has become a four-letter word to millions of people, from earnest middle-schoolers to purist Whole Foods shoppers. ... The United Nations’ Food and Agriculture Organization estimates that we must double the current level of food production to adequately feed a population predicted to hit 9.7 billion by 2050—and we’ll have to do it on less land (much of it scarce of water), using fewer resources. ... Historically, Monsanto has tried to increase farm yields through advancements in seed technology alone. Grant calls this “hubris”: “Twenty years ago,” he says, “we thought biotech was going to be the panacea.” In the past half-decade the company has begun to look beyond seed for answers. ... Breeding better seed has contributed to a more than 1% annual increase in corn yields, experts say. Biologists, for instance, have created corn plants that can be clustered closer together, meaning there can be more stalks per acre. Still, that yearly growth rate would leave the U.S. average below 200 bushels by the end of the decade—far from Hula’s corn bonanza and nowhere near enough to feed the planet. ... Combined, those seeds now fill some 400 million acres around the globe. That’s a fraction of the nearly 4 billion acres of land the UN estimates is being cultivated. Climate Corp.’s chief technology officer Mark Young doubts that that Monsanto could ever get to a billion-acre footprint just by being a seed company, “but as a decision-based company, it seems to have a really good shot.” Monsanto, for example, doesn’t sell grape seeds, but it could some day advise grape growers on how to increase their yields.
Steve Easterbrook doesn’t seem like the sloganeering type. He’s cool, a rational technocrat rather than a fiery head coach. Yet Easterbrook has two slogans he regularly employs. The phrases—“Act first, talk later” and “Progress over perfection”—hint that beneath his reserved exterior he’s aiming for real change. ... In a year and a half at the helm he has begun paring costs and decided to move McDonald’s MCD -1.81% headquarters from the suburbs back to Chicago. More important, in the U.S. market he launched McDonald’s successful All Day Breakfast, removed high-fructose corn syrup from the company’s buns, ended the use of key antibiotics in the company’s chickens, and embarked on a 10-year plan to liberate the birds that lay its eggs from the cages in which they have long been confined. The latter two changes are potentially transformative not only for McDonald’s—where chickens and eggs now account for 50% of the items on the menu—but for the entire American food industry. ... The Golden Arches are touting purity and provenance rather than solely relying on product launches—Shamrock shakes! the McRib!—to generate buzz as the company did in the past. The new approach allows McDonald’s to tap into the nation’s health zeitgeist in a way that it never has before. ... McDonald’s isn’t waiting for the supply—it’s creating it. But the seemingly simple change to cage-free eggs involves complex and expensive logistics, as we’ll see, and there’s a long, long way to go: Right now only 13 million of the company’s 2 billion U.S. eggs are cage-free.
The company’s deliberateness and caution may seem out of step in an age when management gurus celebrate a “fail fast” ethos. But for nearly three decades it has been a pace that has seemed to sit well with health-minded and environmentally conscious consumers, who have made Seventh Generation the biggest green cleaning brand in the U.S. market, with some $250 million in annual sales. In a relatively sleepy industry, the company’s revenues have averaged double-digit growth rates since 2006. ... The deal is a bet by Unilever on the continued evolution of a species: the eco-conscious consumer—an alert, premium-paying shopper. Initially that group was concerned only (or mostly) with what they put inside their bodies. Next they became more selective about what they put on them—and finally with what’s around them. In other words, says Nitin Paranjpe, president of Unilever’s home-care business, “it started off first in food, then moved to personal care, and now to home care as well. The entire natural segment is clearly on trend.” ... These shoppers, the theory goes, don’t just want cleaners that sound as though they’ve got a whiff of sage and citrus, but ones that are actually free of ingredients that consumers can barely pronounce and don’t understand. This demand for purity and simplicity, after all, has been one of the biggest drivers in the food industry for the past few years. ... another challenge for Seventh Generation now isn’t getting things clean, necessarily, but changing shoppers’ minds about what clean means. Consumers typically evaluate a detergent based not only on whether it removes stains and brightens clothes but also on whether it leaves them smelling “clean.” The problem is, clean isn’t supposed to smell like anything.
Whatever their aspirations, people keep right on gorging. Americans now eat a total of 76 pounds in various sugars every year, up 8% from 1970. ... That’s the problem for Big Food: It’s built on the stuff. Some 74% of packaged foods and beverages in the U.S. contain some form of sweetener ... the final factor that is pressing heavily on packaged food companies: the ever-more-ravenous appetite for “natural,” unprocessed products. ... Think of food companies’ plight this way: The finest scientists in industry have spent decades trying to find or invent a no-calorie sweetener that tastes and feels as good as the stuff extracted from pure cane. And now, after they largely failed to master that complex, arduous task, the level of difficulty is being raised even higher: This improbable concoction cannot appear to have been engineered by scientists. ... Most people in the business believe that a “systems approach”—a blending of ingredients rather than a single molecule—is the future of the natural-sweetener industry.
Handing over control of a company is always tricky—Schultz, 63, officially relinquished the CEO job on April 3—and doubly so when it involves a charismatic, longtime leader who all but founded the company. ... In Schultz’s case, how does a notorious perfectionist who craves total control apply his perfectionism to the act of ceding control? That challenge is all the more fraught because his most notorious professional failure by far was his last attempt to leave as CEO, in 2000, a slow-boiling disaster that eventually concluded with his triumphant return. ... Beyond covering the planet with coffee bars, Starbucks has two main growth initiatives, which Johnson calls the “most critical things for the future of the company.” Johnson will be in charge of one of them: the continuing development of Starbucks’ digital and mobile operations. ... second key area will fall to Schultz. As executive chairman, he’s leading Starbucks’ push to develop a higher-end brand and “experiential destinations” to entice people who have abandoned malls to stop by a store. That strategy involves a three-pronged attack consisting of (1) the Roastery, a handful of massive, ultraluxurious coffee palaces inspired in part by Charlie and the Chocolate Factory; (2) a new brand of rare and single-origin coffee beans called Reserve; and (3) a second line of boutiques—a notch above a regular Starbucks but not quite as over the top as the Roastery—also called Reserve.